Families to get more cash from carbon scheme

THE average household will be much better off than the Gillard government has calculated after pocketing carbon tax compensation, according to independent modelling.

The National Centre for Social and Economic Modelling has found that tax cuts and higher government pension and family payments will leave households an average of $2.40 a week ahead after the carbon tax, rather than only 20¢ as estimated by Treasury.

Using more recent household expenditure data, the study found the average household would pay $8.50 a week in higher prices because of the tax (lower than Treasury's estimate) but gain $10.90 in tax cuts and benefits (more than Treasury assumed).

Unlike the Treasury modelling, the study reveals which households are winners and which losers.

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It shows that low-income families with children (the bottom 20 per cent) are on average $6.30 a week ahead, middle-income families $1.30 ahead and high-income families (the top 20 per cent) are $6.30 a week worse off.

All single parents with children come out ahead, low-income earners by $5.60 a week, middle-income households by $11.80 and high-income families by 50¢.

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In total 69 per cent of households will be better off, 16 per cent worse off by less than $5 a week, almost 10 per cent worse off by between $5 and $10 a week, and almost 5 per cent worse off by more than $10 a week.

According to NATSEM, pensioners will be on average $4.70 a week better off and 80 per cent of self-funded retirees will also come out ahead.

The average Australian household will be $2.40 better off, on average, rather than $0.20, as estimated by Treasury. Photo: Ron Chapple

NSW households will be on average $2.60 a week in front, less than the average $3.40 gain for Queenslanders who have lower heating costs, but more than higher-earning residents of the ACT, who will be 60¢ behind on average. Victorians will benefit by $2.30 a week.

The Coalition has said that repealing the carbon tax would be its ''first order of business'' in government, and the compensation would therefore not be needed, although the Opposition Leader, Tony Abbott, has also promised as yet unquantified personal tax cuts.

But the Coalition's warning to business not to buy forward-dated pollution permits has drawn criticism from electricity generators, which say the inability to hedge against price uncertainty could add 10 per cent to domestic power prices.

A spokesman for Pacific Hydro said the Coalition ''seemed intent on creating a sovereign risk for investors'' and the chief executive of the Clean Energy Council, Matthew Warren, said the proposed corporation was ''a necessary and logical institution''.

Late yesterday the shadow treasurer, Joe Hockey, seized on comments by officials from the Finance Department in a Senate estimates hearing to claim that the fund would blow a $10 billion hole in Labor's plan to return the budget to surplus.

But the officials said loans issued by the fund would hit the budget bottom line only to the extent that they were offered at a less than commercial rate of return. They had estimated about a third of the loans would be concessional, and this cost had already been factored into budget calculations, which include $944 million from the fund over the first four years.

The Prime Minister, Julia Gillard, accused the Coalition of wanting to ''destroy clean energy jobs … and see power prices go up''.

But the opposition spokesman on finance, Andrew Robb, said the proposed corporation was ''a Bob Brown slush fund''.